UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
(Mark one)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED June 30, 1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-34144
CML CHURCH MORTGAGE TRUST
1990 RATED SERIES A-1
(Exact name of registrant as specified in its charter)
Wisconsin 39-1676037
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
2727 Allen Parkway, Houston Texas 77019-2115
(Address of principal executive offices) (Zip Code)
(713) 529-0045
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) had filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __x___ No ___
Indicate number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
At June 30, 1999 there were no shares of Common Stock outstanding.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statement
CML CHURCH MORTGAGE TRUST
1990 RATED SERIES A-1
Statement of Trust Activity (Unaudited)
For the Three Months Ended
June 30,
1999 1998
(i) Distribution allocable to principal on the mortgage $ 5,127
$1,218,610
loans (includes $0 and $800,496 of prepayments
for the three months ended June 30, 1999 and 1998,
respectively).
(ii) Distribution allocable to interest on the mortgage $ 14,926 $ 38,063
loans
(iii) Deferred interest added to the aggregate principal $ 0
$
0
balance of the mortgage loans
(iv) Shortfalls to date $(15,083) $
12,286
(v) Advances included in amounts actually distributed $ 0
$ 0
(vi)(a) Aggregate amount of the subordinated distribution $ 0 $
0
which was paid to the senior certificate holders
(vi)(b) Aggregate amount of withdrawals from the reserve $ 0 $
0
fund
(vii) Aggregate principal balance of mortgage loans at $ (5,127) $
875,645
end of period
(viii) Aggregate amount in the shortfall account $ 0 $
0
(ix) Administrative fees retained or withdrawn from the $
2,610 $ 4,354
collection account
(x)(a) Aggregate principal balance of mortgage loans $
0 $ 0
delinquent
(x)(b) Aggregate number of loans delinquent $
0 $ 0
(xi) Book value of real estate acquired through $
0 $ 0
foreclosure or grant of deed in lieu of foreclosure
(xii)(a) Subordinated Amount Class B $ 0 $
0
(Class B, C, and D mortgage pass-through Class C 0
0
certificates net of unamortized premium/ Class D 0
0
discount) Total $ 0
$ 0
(xii)(b) Subordinated amount, as a percentage of the principal 0
0
balance reported under (vii) above
(xiii) Amount remaining in the Debt Service Reserve Fund $ 0 $
0
(xiv) Weighted average mortgage pass-through rate as of 10.28%
10.28%
the first day of the month immediately preceding the
reporting date.
(xv) All voluntary advances recovered during the related $
0 $ 0
prepayment period.
See accompanying notes to the financial statement.
CML CHURCH MORTGAGE TRUST
1990 RATED SERIES A-1
Statement of Trust Activity (Unaudited)
For the six Months Ended
March 31,
1999 1998
(i) Distribution allocable to principal on the mortgage $ 6,863
$2,974,898
loans (includes $0 and $968,563 of prepayments
for the six months ended June 30, 1999 and 1998,
respectively).
(ii) Distribution allocable to interest on the mortgage $ 27,443 $ 106,349
loans
(iii) Deferred interest added to the aggregate principal $ 0 $
0
balance of the mortgage loans
(iv) Shortfalls to date $916,375
$ 255,087
(v) Advances included in amounts actually distributed $ 0 $
0
(vi)(a) Aggregate amount of the subordinated distribution $
0 $ 0
which was paid to the senior certificate holders
(vi)(b) Aggregate amount of withdrawals from the reserve $ 0 $
0
fund
(vii) Aggregate principal balance of mortgage loans at $868,782 $
875,645
end of period
(viii) Aggregate amount in the shortfall account $
0 $ 0
(ix) Administrative fees retained or withdrawn from the $ 5,588
$
9,181
collection account
(x)(a) Aggregate principal balance of mortgage loans $
0 $ 0
delinquent
(x)(b) Aggregate number of loans delinquent $
0 $ 0
(xi) Book value of real estate acquired through $
0 $ 0
foreclosure or grant of deed in lieu of foreclosure
(xii)(a) Subordinated Amount Class B $ 0 $
0
(Class B, C, and D mortgage pass-through Class C 0
0
certificates net of unamortized premium/ Class D 0
0
discount) Total $ 0
$ 0
(xii)(b) Subordinated amount, as a percentage of the principal 0
0
balance reported under (vii) above
(xiii) Amount remaining in the Debt Service Reserve Fund $ 0 $
0
(xiv) Weighted average mortgage pass-through rate as of 10.28%
10.28%
the first day of the month immediately preceding the
reporting date.
(xv) All voluntary advances recovered during the related $
0 $ 0
prepayment period.
See accompanying notes to the financial statement.
CML CHURCH MORTGAGE TRUST
1990 RATED SERIES A-1
Notes to Financial Statement (Unaudited)
(1) Basis of Presentation
The financial statement included herein has been prepared without audit by
Central United Life Insurance Company ("CUL"), the servicer of the mortgage
loans, on behalf of the M & I National Trust Company, as successor to M&I
First National Bank, Trustee of the CML Church Mortgage Trust 1990 Rated
Series A-1 ("Trustee").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to rules and regulations
of the Securities and Exchange Commission, although CUL believes that the
disclosures are adequate to make the information presented not misleading.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto included in
the Trust's latest annual report on Form 10K.
On January 1, 1995 the Trust adopted Financial Accounting Standards Board
Statement No. 114, Accounting by Creditors for Impairment of a Loan, which
requires that creditors value all loans for which it is probable that the
creditor will be unable to collect certain amounts due according to the
terms of the loan agreement at the present value of expected future cash
flows, discounted at the loan's effective interest rate, or observable
market price of the impaired loan or the fair value of the collateral if
the loan is collateral dependent. Management believes that loan carrying
values and loan loss reserves provided in this 10-Q Filing comply with the
requirements of this Statement.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Second Quarter 1999 vs. Second Quarter 1998
The Trust redeemed $0 and $1,031,361 of mortgage pass-through certificates
during the second quarter of 1999 and 1998, respectively. The distributions
were made from principal payments received on the mortgage loans.
First Six Months 1999 vs. First Six Months 1998
The Trust redeemed $0 and $1,845,894 of mortgage pass-through certificates
during the first six months of 1999 and 1998, respectively. The
distributions were made from principal payments received on the mortgage
loans.
The Trust received $40,078 and $234,305 of distributions allocable to interest
on the mortgage loans during the second quarter of 1999 and 1998,
respectively. The lower interest income for 1998 is attributed to the
lower principal balances of mortgages outstanding due to mortgage
amortization and mortgage loan principal prepayments. These prepayments
result in lower net income because the profit produced by the differences
in the interest rate collected on the mortgage loans and the rate paid to
bondholders decreases as mortgage loans are prepaid. Prepayments also
increase the charge in the period of prepayment for amortization of
deferred issuance costs, which occurs over the life of the outstanding
bonds.
As of May 1, 1994 the lockout period for mortgage loan prepayment had expired
for all mortgage loans in the 1990 Rated Series A-1 pool. Because the
interest rate on the mortgage loans in the pool is higher than the
prevailing rates for similar loans, prepayments on principal on the
mortgage loans are likely to occur. Seventeen mortgage loans with
outstanding balances totaling $17,387,137 had been prepaid as of March 31,
1999. These proceeds from prepayment were used to make principal payments
on Class A mortgage pass-through certificates. Although $17,387,137 of
prepayments have been received to date, no assurance can be given as to the
rate of prepayments on the mortgage loans pledged as security for the
mortgage pass-through certificates, and therefore no assurance can be give
as to the amount and timing of redemptions of mortgage pass-through
certificates or the time that any particular mortgage pass-through
certificate will remain outstanding prior to its stated maturity.
Management of Central United Life Insurance Company (CUL), as servicer of the
loans, is closely monitoring two loans with recorded balances totaling
$1,073,634 at June 30, 1999. Management is concerned with the ongoing
ability of the borrowers to meet debt service requirements. One of the
loans with a recorded balance of $849,075 has been recorded in accordance
with Financial Accounting Standard Board Statement No. 114 based on the
value of the underlying loan collateral less costs of disposal. For the
other loan with an outstanding principal balance of $224,559 management
presently believes that the principal balance and accrued interest should
be fully recoverable in the event of default.
The church building and property securing the loan with a recorded balance of
$849,075 at June 30, 1999, which is included in the amount of closely
monitored loans as previously discussed, are located near the south central
section of Los Angeles, California, the scene of civil unrest on April 29,
1992 and an earthquake on January 17, 1994. Management established a loan
loss reserve of $652,422 and $258,698 in 1994 for foregone interest at
December 31, 1994.
With respect to this loan, the church's sanctuary had been damaged by the
earthquake. The church reported that it had originally obtained a loan from
the Small Business Administration for $607,700 at 4% interest to assist in
reconstruction of the sanctuary. The church also reports the permitting
process is completed. Four contractors have submitted bids each in excess
of $1,100,000. The church has informed the company that the SBA has
approved its request to borrow additional funds, for a total SBA loan
amount of $1,278,200. The treasurer reports that a possible sale of the
property to Magic Johnson Construction Company is being negotiated. This
could lead to a pay off of the mortgage by year-end if negotiations are
successful. Meanwhile, the church has completed the rehab of the sanctuary.
The treasurer has assured management that weekly drafts will be honored.
The church reports that the summertime is difficult for collections;
however, the treasurer has communicated his and the church's hope that the
momentum created by the construction of the sanctuary will stabilize
giving.
Although it was reported that the sanctuary rehab was completed, there are
additional items that must be finished before a certificate of occupancy is
issued. Meetings have been conducted in the sanctuary pending the issuance
of the certificate, however, the church reports that it owes $100,000 to
the sub-contractor and it needs an additional $100,000 to complete all
items on the certificate. The church has applied for an additional
$200,000 from the SBA which has been rejected. They are appealing that
decision. Meanwhile work has been halted on completion of the remaining
items.
On March 7, 1997, the treasurer proposed a new payment schedule for a twelve
month period. The schedule provides for a weekly draft of $4,500 for a
monthly payment of $19,500. Additional drafts of $10,000 on March 11,
$13,800 on April 11, $13,800 on May 11 and $10,000 on June, July, August
and September 11 will enable payments to be current at the $19,500 per
month level. The additional draft for April 11 was successfully completed
on April 24. The additional draft for May 11 in the amount of $13,800 was
returned for insufficient funds. The additional drafts for $10,000 for
June, July and August have not been completed.
Weekly drafts of $4,500 continue to be returned for insufficient funds. The
treasurer reports that although the number of people has increased from 450
to 1,000, the offerings have remained the same. The church is planning on
a major giving campaign as well as two concerts to aggressively address
their giving shortfall. Advising the people of financial needs is a
departure from their usual practice. The treasurer is confident the people
will respond to the plea.
On February 17, 1998, the treasurer reported that the City Council has approved
the necessary GAP financing required and finalized the contracts with Magic
Johnson/McFarlance Urban Partner, Group. Negotiation for acquisition began
in March 1998. It was estimated that a payoff could occur by January 1999.
Meanwhile, construction activities remain halted pending FEMA issues. On
August 17, 1998, the treasurer reported that negotiations for acquisition
are proceeding as planned. On October 29, 1998 the treasurer reported that
an initial offer was refused by the Church and an apology for the offer was
made. The Church was assured that any future offers will be equitable.
On August 25, 1999 the Treasurer reported that negotiations between the Santa
Barbara Plaza ( location of the church) and three (3) anchor tenants have
terminated. With no major leases signed, the developer (Johnson/
Macfarlance Group) cannot obtain the necessary financing for the purchase
of the property. The Community Redevelopment Agency (CRA) expects to wait
7-10 dyas for an alternate proposal. If there is no alternate proposal, all
negotiations may be terminated with the present developer and the
redevelopment opportunity will be open to other developers.
With respect to the loan with a recorded balance of $224,559 the church has not
been able to make complete monthly payments since April 1, 1996 and is
presently in arrears. The company is presently communicating with the
church in efforts to bring the payments current. Management, although
concerned with the ongoing ability of the church to meet the monthly
payment, continues to believe all principal and interest are recoverable
in the event of default. A site visit in April 1998 by the servicer found
the property in good repair and recently painted. On February 1, 1999 the
loan payment account was fully funded with three (3) months of monthly
mortgage payments. Monthly payments have been received regulary since
December 1, 1998. All past due interest were paid as of February 1, 1999.
Through June 30, 1999 the Trust has experienced total payment shortfalls of
$916,375 This shortfall represents principal and interest payments due to
bondholders, but not yet disbursed because mortgage payments received by
the Trust are not adequate to cover these debt service payments. The total
amount of interest accrued but not recorded at June 30, 1999 is $454,785.
In assessing the recoverability of loan balances, management evaluates factors
relevant to the borrower's financial condition and obtains updates of
original appraisals when considered necessary. The Trust has recorded a
general loan loss reserve of $200,000 which is specifically related to the
loans which collateralize the mortgage pass-through certificates.
Liquidity and Capital Resources
The Trust has no fixed assets nor any commitments outstanding to purchase or
lease any fixed assets.
Each class of certificates was structured in a manner that such funds received
from the related mortgage loans would be sufficient to fund all interest
and principal payments on the certificates, and all other expenses of the
Trust. Shortfalls discussed in note 2 were not anticipated in cash flow
projections at the time the pool was formed. Because of these matters,
the Trust has not made $916,375 of scheduled principal and interest
payments to date on the senior and subordinated mortgage pass-through
certificates. Additionally, no assurances can be given as to the amount of
shortfalls of principal and interest on loans in default which may occur in
the future. The certificates represent an interest in the Pool created
pursuant to the Pooling Agreement and do not represent an interest in or
obligation of, and are not guaranteed by the Company, CUL, the Underwriter
or any other affiliate of the Company, or any other person or entity other
than the Pool created pursuant to the Pooling Agreement. Distributions of
interest on the certificates and amounts in reduction of outstanding amount
of the Class A, Class B, Class C and Class D Certificates will be made from
the assets held by the Trustee under the Pooling Agreement (primarily the
mortgage loans and principal and interest payments thereon) and there will
be no other source of funds for such distributions.
Year 2000 Compliance
The Company utilizes an external trustee to process the majority of its mission
critical transactions and has gathered information about their year 2000
compliance status. The Company continues to monitor their compliance.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
Defaults are discussed in detail under Management's Discussion and Analysis of
Financial Condition and Results of Operations. Shortfalls against
scheduled payments and reconciliations of actual indebtedness to scheduled
indebtedness, by class, are shown below:
Quarterly Total
Principal Principal
& Interest & Interest
Bond Indebtedness Shortfalls Arrearage
Class (Par Value) (Recoveries) to Date
A $ 739,395 $ 400,060 $ 791,471
B 25,571 51,142
C 20,615 42,943
D 15,410 30,819
Total $ 739,395 $ 461,656 $ 916,375
Principal Unrealized Scheduled
Bond Indebtedness Shortfalls Losses Indebtedness
Class (Par Value) to Date to Date (Par Value)
A $ 739,395 $ 651,341 $2,918,306 $ 3,006,361
B 938,379 938,379
C 203 1,141 938
D 622,615 622,615
Total $ 739,395 $ 651,544 $4,480,441 $ 4,568,292
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date CML Church Mortgage
Trust
1990 Rated Series A-1
September 1, 1999 By: /s/ Roger T. Stephenson
Roger T. Stephenson
Vice President
September 1, 1999 By: /s/ M. F. Hron
M. F. Hron
Vice President
